With 25 years in financial services, Mark, our Director of Finance, is a well-regarded leader in the industry.
In 2014 the Australian Prudential Regulation Authority (APRA) introduced a 10% annual cap on investor loan growth to cool a “hot” market. This required that lenders took immediate action to get under the 10% limit. Consequently, this had an effect for investors on the amount they could borrow and led to higher interest rates for many investors. This prudential decision was introduced to cool the market by limiting the amount of investment lending.
Roll forward to 2018, and this cap has just been lifted, which, Mark says is great news for the market. In April 2018, Core Logic reported annual property values as declining in the Sydney market overall, as well as in the March quarter. He considers whether “limiting the flow of capital to investors, had an adverse effect on asset values?”
Mark feels this measure may have had a negative impact on confidence as well. “Will lifting this prudential measure serve to improve confidence to the same level as when it was introduced?” Time will tell.
He also reminds us that prudential measures come and go, while DPN is here for the long haul. In business for more than 20 years, DPN has managed customers through turbulent periods, as we’ve seen property growth cycles peak and trough.
Mark’s ensuring advice is to know your strategy, stick to your plan and don’t get too hung up on passing trends. If you have a solid strategy you will see out many changing cycles.
So, while it’s important to be aware of today’s policy, in the long term, strategy and research will always win.